A lack of vision

It is a well known fact that the economic policy of any country has two essential facets. The first pertains to the monetary policy and the second deals with the fiscal policy.

The budget is a policy statement highlighting how the government in power intends to handle the economy in the coming financial year. It is an important micro-economic concept which flows out from government’s broad economic vision as spelt out in party manifestos. In essence, the budget is just an estimation of the total quantum of revenue generation, its sources and expenditure details.

Governments set attainable realistic targets and then endeavour to achieve them. About 257 years ago in 1763, the first budget was presented by the then British government because seven years of war (1956-63) had increased their debt from 74.6 million pounds to an alarming figure of 132.6 million pounds which went much beyond their acceptable limits of GDP percentage. This practice of budget-making was later also followed by other nations.

It needs to be understood that a budget is not a mere exercise. It’s purpose is to create order and discipline in financial matters, to bring transparency in financial management, to hold people accountable if targets are not met and to ensure balanced growth in the economy.

The litmus test for a good budget is: will it bring prosperity for the people or add to their miseries?; will it stimulate business activity and be investor friendly or run counter to the desired concept of ease of doing business?; will the GDP growth accelerate or retard?; will inflation be suppressed or will it sky rocket?; will more jobs be created or lost?; will the budget pull people above the poverty line or push them down?; have we allocated enough funds for development projects to create more economic activity?

Moreover, will per capita income improve or deteriorate?; will the size of the economy expand or shrink?; will the current and fiscal account deficits be reduced or further expand?; have we allocated enough funds for national security based on enemy’s capabilities and constant war mongering or have we further reduced the defence budget by freezing it?; and have enough funds been allocated for education and health sectors to achieve the UN's sustainable development goals?

The answers to almost all these questions are unfortunately in the negative. The size of the economy has shrunk from $315 bn to $264 bn, GDP growth has taken an unprecedented nose dive from 5.8 percent to 1.9 percent last year and the World Bank expects it will further go down to - 0.4 percent this year – the first time since 1952.

Revenue collection has a shortfall of about one trillion rupees. Inflation went up from 4 percent to as high as 24 percent and is still in double figures – although it is being reported as 8.5 percent. Per capita income has reduced from over $1600 to about $1200 while population wise a six times bigger India has over $2300 per capita income.

More than 1.5 million people have last their jobs in the last one year before Covid-19, while the government had promised to create 10 million jobs. About five million additional people have fallen below the poverty line. At present, about 10 crore people are below the poverty line. Circular debt has jumped from Rs1100 bn to Rs2000 bn. Energy theft and losses to the tune of Rs2000 bn have not been controlled. Interest rates were foolishly taken to over 13 percent which did colossal damage; they have now been brought down. Similarly, FE reserves are very modest.

The government lacks vision and has no long-term economic policy; ad-hocism is the order of the day. The economic team unfortunately seems to be only grappling with the branches of a sick tree while the roots need attention and immediate cure.

The government's first priority should be a growth-related economic strategy. It must concentrate on refining and enabling human capital by giving them technical and vocational training in fields relevant to our economy, agriculture and industrial growth and the service sector. It must promote a knowledge economy and concentrate on environment-friendly renewable energy so that energy prices are cut down

The government should either effectively run SOEs or privatise them. The national leadership is paralysed in decision-making, and pays very heavy price in the long run. Ten million people in the form of our diaspora abroad feel neglected although their remittances are very valuable for our fragile economy. The government must attend to their difficulties.

The PM has a battalion of 52 ministers and unelected advisers. This needs needs a drastic cut down. CPEC is neglected and no progress so far has come to light on the proposed economic zones and the development of the Gwadar Port. Pay and pension increase is a must to cater for inflation. The armed forces pensioners, especially war veterans and their widows, are worst hit. Their demand is one-rank, one-pension – which is very fair. Last but not the least, the style of governance will have to be drastically changed to create the desired national unity, and achieve much-needed synergy to meet the big challenges posed to people’s lives and their livelihood. But alas this manufacturing defect in the personality of our leadership seems difficult to rectify.

The writer is a member of the Senate.